Wednesday, 20 August 2008

BAA break-up

This time last year, and in many business news reviews, I have noted the dire straits that BAA has been in. Financially, the acquisition by Ferrovial was a disaster. The costs of funding could not be refreshed due to the credit crunch and the business was forced to seel World Duty Free; the most profitable piece of the company. 200 redundancies were announced too.

However, the decision by the Government today will save Ferrovial's bacon in many ways. Expectation of the break up had allowed Ferrovial to finally re-finance the debt, given the proviso that big chunks could eb paid back from any forced sale.

OS instead of hammering Ferrovial and forcing it to pay for its mistake, the management will escape this disaster with money in their pockets.

Far more worrying is the need to sell off 2 London Airports, rather than just Gatwick as expected. Whilst I am all in favour of competition as a capitalist, sometimes it does not work perfectly. Witness rail privatisation. The Government really controls new runways and terminal buildings etc, not the private sector. This is already a distorted market.

Perhaps though competition will win through and help to deliver better services out of the decaying infrastructure that is the Southern Airports. On the downside I see that Ryanair, a truly mercenary and terribly behaved company, are dying to buy Stanstead. As Unscrupulous mercantilists they would wreck the airport for other operators and push up charges for passengers on other airlines.

If you think that BAA is a bad owner, replacing them with Ryaniar will not be a step forward.

given that Terminal 5 at Heathrow is part of British Airways in the public imagination (and not for the right reasons, so far), I don't see anything wrong with new owners joining with airlines or airline alliances in partnerships when providing terminal facilities: for example, a Virgin Atlantic terminal at Gatwick, with that becoming their base, could provide a real sense of choice for the tourist and traveller - do you want T5-BA or LGWterminal-VA to provide your seamless experience...? For one airline to own an entire airport does not seem so offensive a proposition until that airline turns out be Ryanair - a truly appalling proposition....